Duxton’s Agri Bits and Pieces – Vol. 328
Posted on: March 29th, 2017


This week’s quote of the week comes from Anthony Pratt, executive chairman at Visy, on the rising number of manufacturing plants as one of the keys to Australia’s success in increasing food exports from $27 billion to $42 billion during the same period.

“Our agriculture sector just made its highest contribution to GDP growth since 2008…we need a constant focus on food exports to our Asian neighbours especially because our seasons are counter-cyclical to Asia’s, which is a great opportunity.”


China’s soybean imports will set a record high for a 14th consecutive season, backed by ever-growing demand for protein and vegetable oils – although South American exporters, rather than the US, will pick up the extra demand.

US Department of Agriculture staff in Beijing, in their first forecasts for 2017-18, pegged Chinese soybean imports, by far the world’s biggest, at 89m tonnes, up 3m tonnes year on year on its estimates.

That would extend a spell of unbroken annual increases in Chinese purchases going back to 2004-05, when imports came in at 25.8m tonnes.

However, China’s purchases of soybeans from the US will hold steady at 30.0m tonnes next season, the bureau said, flagging “fierce competition from South American suppliers”.

Brazil’s shipments to China have been underpinned by a weakened currency, while “lower export taxes” are spurring shipments from Argentina, the bureau said in a report.

China’s increasing need for imports comes despite growing popularity of the oilseed among the country’s own farmers, following cuts to subsidies for planting corn, a major competitor to soybeans in the country’s spring sowings programme.

After years of offering farmers’ poorer returns than corn, “soybean earnings are estimated to be the same or even higher than corn” in China’s four key north eastern producing provinces, including Heilongjiang and Inner Mongolia.

Prospects for production growth are being undermined nonetheless by poor yields, which have averaged 1.79 tonnes per hectare in China over the past four years – 39% below the US record over the same period.

Besides their lack of access to cutting edge seeds, Chinese soybean farmers quest to raise yields faces “major impediments” including the small scale of famers and “inadequate” use of practices such as crop rotation.

Meanwhile, Chinese demand for the oilseeds “driven by an increasing domestic demand for meats, eggs, milk, seafood and vegetable oils”, with soybeans being crushed into feed ingredient soymeal, as well as soy-oil. The consolidation of China’s meat industry, into larger, more professional business from backyard operators less likely to buy in feed, is also spurring demand growth.


Scientists infer the impact on agriculture based on predictions of rainfall, drought intensity, and weather volatility. Until now, however, the average farmer may not have been able to put predictions like these into practice. A new University of Illinois study puts climate change predictions in terms that farmers are used to: field working days.

“Everything else flows from field working days,” says U of I and USDA Agricultural Research Service ecologist Adam Davis. “If you’re not able to work, everything else gets backed up. Workable days will determine the cultivars, the cropping system, and the types of pest management practices you can use. We’re simply asking, ‘Can you get in to plant your crop?”

The group ran the models for nine crop districts in Illinois for two time periods, mid-century (2046-2065) and late-century (2080-2099), using three climate scenarios ranging from mild to extreme.

The models suggest that the typical planting window for corn will no longer be workable; April and May will be far too wet to work the fields in most parts of Illinois.

“Going forward, we’re predicting warmer and wetter springs, and drier, hotter summers,” Davis says. “The season fragments and we start to see an early-early season, so that March starts looking like a good target for planting in the future. In the past…nobody in their right mind would have planted then.”

“Drought periods will intensify in mid-to late summer under all the climate scenarios. If farmers decide to plant later to avoid the wet period in April and May, they’re going to run into drought that will hit yield during the anthesis-silking interval, leading to a lot of kernel abortion. That second planting window is probably pretty risky,” Davis says.

The researcher suggests three strategies to cope with the changes. Farmers could plant early with long-season cultivars to maximise yield potential, betting on a pollination window to open up before the drought kicks in. Or farmers could choose shorter-season cultivars, planting early and then harvesting before the drought, possibly sacrificing yield.

The last strategy will require a more radical shift. “To create cropping systems that can deal with increased volatility by conserving soil moisture. Most of the effort in yield stability and resilience focuses on genetic improvement of crops. If you’ve got an elite cultivar that’s drought resistant in the same old cropping system that’s not shifting with environmental changes, then we’re not doing full justice to that cultivar,” Davis says.

CHART OF THE WEEKThis week’s Chart of the Week comes from the Economist’s Liquid Gold: Companies are racing to add value to water, which depicts the growing market for bottled water, with the global market growing by 9% annually in recent years.




This newsletter has been prepared by Duxton for circulation to its clients, who are accredited or institutional investors as defined in the Securities and Futures Act, Chapter 289 of Singapore and the Securities and Futures (Prescribed Specific Classes of Investors) Regulations (”Permitted Investors”), and is not intended for use by retail investors. The fund management industry in Singapore is regulated by the Monetary Authority of Singapore (”MAS”), and no person can act as a fund manager unless they are the holder of a capital markets services licence for fund management or are operating as a registered fund management company. Duxton Asset Management Pte Ltd holds a Capital Markets Services Licence to conduct the regulated activity of fund management for accredited and/or institutional investors.

This newsletter is for distribution only under such circumstances as may be permitted by applicable law. Nothing in this newsletter constitutes financial, investment, tax, legal or any other form of advice, recommendation or a representation that any investment strategy or recommendation contained herein is suitable or appropriate to a recipient’s individual circumstances, or otherwise constitutes a personal recommendation. In particular, nothing in this newsletter is intended to constitute financial advice under the Financial Advisers Act, Chapter 110 of Singapore. Duxton, its employees or its affiliates may from time to time hold, either directly or through the portfolios that it manages, an interest in some or all of the stocks or companies discussed in this newsletter. Where stock or company names are mentioned, it should not be construed that these are recommendations to buy or sell those stocks or companies. If you require investment advice please contact a regulated financial adviser.

This newsletter is published solely for general information purposes, does not constitute an advertisement and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments in any jurisdiction. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the markets or developments referred to in the newsletter.

This newsletter is not the basis for any contract to deal in any security or instrument, or for Duxton or their affiliates to enter into or arrange any type of transaction as a consequence of any information contained. Information from this newsletter must not be issued in any jurisdiction where prohibited by law and must not be used in any way that would be contrary to local law or regulation. Specifically, this newsletter is not directed at US persons.

To the fullest extent permitted by law, neither Duxton nor any of its affiliates, nor any of Duxton’s or any of its affiliates’ directors, employees or agents, accepts any liability for any loss or damage arising out of the use of all or any part of this newsletter.

Duxton specifically prohibits the redistribution of this material in whole or in part without the written permission of Duxton and Duxton accepts no liability whatsoever for the actions of third parties in this respect.

All third party data (such as Bloomberg) are copyrighted by and proprietary to the provider.